Australians want people with health problems to pay more for insurance, new research suggests

Australians want private health insurance to be risk-rated, forcing those with existing health conditions to pay more for private care.

New research commissioned by insurance comparison site comparethemarket.com.au suggests a large number of Australians want to pay less for their health insurance because they have good health.

The research investigated how Australians feel about the Lifetime Health Cover (LHC) loading, which is an additional two percent cumulative annual loading for Australians who take out health insurance for the first time after July 1 following their 31st Birthday.

Health insurance expert at comparethemarket.com.au, Abigail Koch told 9Finance the LHC is “a stick from the government to encourage younger Australians to take out private health insurance when they’re young and hold it for life”.

“It was introduced to support the idea of community rating which aims to provide health insurance for all and ensure those with health issues aren’t disadvantaged. They’d pay the same base premium as someone else,” she said.

The cumulative loading, which can go as high as 70 percent, applies to hospital cover as it was designed to ease the “burden on the public purse”, meaning if you take out extras cover before you’re 31 but no hospital cover, you’ll still be hit with the loading.

However, the survey from Comparethemarket.com.au suggests Australians slugged with the LHC loading (71 percent) would prefer health insurance to be risk-rated.

Ms Koch believes those that believe health insurance should be risk rated “aren’t thinking as deeply about what factors would be taken into consideration”.

She said it would look beyond the obvious things like drinking and smoking habits.

“It could be what job you’re in, you could be in a riskier career,” she said.

“Some people are born with cancer genes – should they have to pay more? Some racial backgrounds have a higher probability of health conditions.

“It’s a really sensitive subject which is why the government and industry feel community rating is an important principal to uphold and everyone is entitled to buy the same product at the same price.”

Comparethemarket.com.au’s analysis of recent APRA data reveals 12.2 percent of Australians pay some form of LHC loading, with the average weighted loading sitting at 23.62 percent.

“Which shows the average age Australians take out health insurance is 42 years old,” Ms Koch said.

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The majority of younger people – aged between 18 and 34 surveyed (80 percent) want those with poor health to be penalised, while less than half of those over 65 (46 percent) agree and want health insurance risk-rated.

The survey also revealed a lot of people don’t fully understand the LHC loading.

Two in five respondents were unaware if they pay a loading on top of their fees.

Half of those surveyed admitted they didn’t know why the LHC was introduced in the first place.

And three in five (62 percent) didn’t know that health insurance wasn’t risk-rated like other insurance products.

Ms Koch said it is up to both the health insurance industry and government to better educate the public about the LHC and the role of community rating for the health industry broadly.

“Informing people about the reasoning behind LHC and community rating should be a priority as it will make people understand why this stick, this loading was introduced in the first place,” she said.